According to the Association of British Insurers (ABI), there’s been a dramatic spike in both interest in and demand for drawdown sales. During the first full year after the new drawdown sales tally hit a whopping £6.1 billion. The average fund size was found to be £67,500, with no less than 90,700 products being opened across the UK in the 12-month period since April 2015.freedoms were brought in, the total
By contrast, annuity investments totalled £4.2 billion for the same period, with an average fund size of just over £52,000.
The ABI also noted that the majority of those purchasing drawdown products made the decision to switch to new service providers while doing so – 53% in total. During the opening quarter of the year, around 4% of pension pots saw withdrawals of 10% or more. By contrast, 57% of pots had withdrawals of 1% or less during the same period.
Documenting exactly what had come to pass in the first full year since the introduction of new pension freedoms, the figures from the ABI showed a quarterly fall in annuity sales. While the closing quarter of 2015 brought about £950 million in sales of annuities, the figure fell to £950 million for the first three months of 2016.
Following the introduction of the new pension freedoms, 300,000 lump sum payments have been made with a total value of around £4.3 billion. According to the ABI’s figures, payments averaged out at £14,500. In addition, total drawdown pay-outs over the same 12-month period totalled £3.9 billion – an average payout of £3,800.
According to the ABI’s director of long term savings and protection, Yvonne Braun, the figures make for reassuring reading and suggest that the new pension freedoms are having a positive effect.
‘New data released shows that more than half of pots are having less than 1% withdrawn a quarter, which seems to indicate most people are taking a sensible approach,’ she commented.
‘However, the data also suggests a minority are withdrawing too much too soon from their pension pot – 4% of pots are having a tenth or more withdrawn – and many other customers are taking their entire pot in one go.’
‘There may well be other factors at play here, such as people having otherincome, for instance, final salary or multiple pots. But this is a warning sign that requires further investigation.’
Making the right long-term financial decisions means first knowing and understanding all of the options available to you. Which is precisely why independent financial advice comes highly recommended to those looking to secure their future and take control of their finances.
freedoms have significantly changed the landscape for millions of savers, for whom making the right decisions early on really can make all the difference.
For more information or to arrange a consultation, get in touch with the Haven IFA team today.